If the argument that scale hurts (all small western countries are very rich, but big countries complain "we're too big because we can't do that and that), then the obvious solution would be to split up. For me it seems just too easy. I think the reasons are more related to the culture than to the size.
It's not that scale hurts; there are many benefits to scale. But obviously, it makes some things harder to deal with. Iceland has a population of 320,000 or so people and only one major city. Politics is a lot simpler with a population that small.
Indeed. Scale has benefits, one can see that for big companies, which have, despite bureaucracy and politics, quite some advantages - scale, wide skills, easier access to financing, global resource access etc.
